Marketing

Thinking about selling home-based or farm-raised foods? Our webinar series offers help

By: Peggy Kirk Hall, Associate Professor, Agricultural & Resource Law

Direct food marketing in Ohio is hot. The latest USDA survey identified 7,107 Ohio farms with direct food sales–third highest in the nation.  That might be why our program receives more legal inquiries about food sales than any other area of law.  And that is also why we’re hosting a three-part webinar series on “Starting a Food Business,” providing an introduction to what a producer needs to know about selling home-based and farm-raised foods directly to consumers and retailers.

The free webinar series will be from 7—9 p.m. on January 24, February 28, and March 28 in 2023, with these different topics each night:

January 24:  Start-Up Basics.  What do you want to sell?  We’ll review initial considerations for selling your food product.  We’ll cover food safety, licensing, legal, and economic considerations for starting up a food business.

February 28:  Selling Home-Based Foods.  Learn about food product development, Ohio’s Cottage Food and Home Bakery laws, and requirements for selling canned foods.

March 28:  Selling Meat and Poultry.  A look at the economics, processing options, and labeling and licensing requirements for selling meat and poultry.

Our teaching team for the webinar series includes:

Nicole Arnold, Asst. Professor and Food Safety Field Specialist for OSU Extension.  Nicole supports food handlers, consumers, and educators with food safety education and risk communication efforts.

Peggy Kirk Hall, Assoc. Professor and Agricultural Law Field Specialist for OSU Extension.  Peggy directs OSU Extension’s Agricultural & Resource Law Program and regularly teaches and writes on food laws.

Emily Marrison, OSU Extension Educator in Family and Consumer Sciences.  Emily’s food science background provides expertise and insight on food safety, product development, and selling home-based foods.

Garth Ruff, Beef Cattle Field Specialist for OSU Extension.  Garth has a background in animal science and specializes in livestock production and marketing, farm management, and meat science.

The webinar series is free, but registration is necessary.  Find details and the registration link at go.osu.edu/foodbusiness.

USDA ERS America’s Farms and Ranches at a Glance – 2021 Financial Performance

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

The United States Department of Agriculture Economic Research Service (USDA ERS) released this report (https://www.ers.usda.gov/webdocs/publications/105388/eib-247.pdf?v=4061.7) in December 2022.  The United States Department of Agriculture Economic Research Service America’s Farms and Ranches at a Glance summarizes a number of metrics about U.S. agriculture.  This paper highlights two indicators (Operating Profit Margin and Current Ratio) of the financial performance of U.S. farms and ranches.

Two Definitions

Since the 1970’s, USDA ERS has defined a farm as any place where, each year, $1,000 of agricultural goods were produced and sold.  USDA ERS uses acres of crops and heads of livestock to determine whether the definition is met.  Farm size is measured by Gross Cash Farm Income (GCFI), a measure of revenue, including acres of crops or numbers of head of livestock produced and sold.

Types of Farms

USDA ERS classifies farms into several types.  The following definitions are taken from the report:

Small family farms (GCFI less than $350,000)

  • Retirement farms: Small farms whose principal operators report having retired from farming, though continuing to farm on a small scale.
  • Off-farm-occupation farms: Small farms whose principal operators report a primary occupation other than farming.
  • Farming-occupation farms: Small farms whose principal operators report farming as their primary occupation. Farming-occupation farms are further sorted into two classes:
  • Low-sales: Farms with a GCFI of less than $150,000.
  • Moderate-sales: Farms with a GCFI between $150,000 and $349,999.

Midsize family farms (GCFI between $350,000 and $999,999)

  • Farms with a GCFI between $350,000 and $999,999.

Large-scale family farms (GCFI of $1,000,000 or more)

  • Large farms: Farms with a GCFI between $1,000,000 and $4,999,999.
  • Very large farms: Farms with a GCFI of $5,000,000 or more.

Nonfamily farms

  • Any farm where any operator and any individuals related to them do not own a majority (50 percent) of the business.

The table below summarizes farms by type, number, acres, and value of farm production.

Financial Performance

The Operating Profit Margin (OPM) is one measure of farm financial performance.  The OPM is the share of gross income that is profit.  In 2021, between 50 and 81 percent of small family farms had an OPM in the danger zone (less than 10 percent).

Large family farms, in 2021, were more likely to have a positive OPM (of at least 25 percent).  Positive on-farm income was also more likely for this classification.

Farms in the medium-risk category had an OPM greater than 10 percent and less than 25 percent.  Between 5 percent and 32 percent of these farms were in this category in 2021.

 

The current ratio is another measure of financial performance.  This ratio is calculated by taking current assets divided by current liabilities and is a simple method to determine whether a farm has enough capital to pay current liabilities.  A ratio less than one indicates a farm is unable to pay its current liabilities if all current assets were liquidated.

In 2021, 57 percent of farms had a current ratio greater than one.

In 2021, 52 percent and 47 percent of retirement and off-farm occupation farms, respectively, had the highest percentage of farms with a current ratio of less than 1.  However, many of these farms rely on off-farm income to compensate for the lower current ratio.

Between 23 percent and 25 percent of moderate, mid-size, and large family farms were in danger of being unable to meet current obligations in 2021.

Assistance

If you are interested in learning more about your financial performance, talk to your lender or your local OSU Extension professional about the OSU Extension Farm Business Analysis and Benchmarking Program.  Additional information is available here: https://farmprofitability.osu.edu/.

Reference

America’s Farm and Ranches at a Glance, 2022, United States Department of Agriculture Economic Research Service, available at: https://www.ers.usda.gov/webdocs/publications/105388/eib-247.pdf?v=4061.7

ODA Restructures Marketing Division:

Source: Ohio Department of Agriculture

The Ohio Department of Agriculture (ODA) is restructuring its Marketing Division to expand outreach and marketing opportunities for Ohio’s food and agricultural businesses. The restructuring will establish a Director of Marketing and add the new Ohio CAN program to the Division.

Christy Eckstein will assume the role of Director of Marketing. She has been with ODA for 20 years, serving as Executive Director of the Ohio Grape Industries Committee (OGIC) since 2007. The Marketing Division will include OGIC, Ohio Proud and Ohio CAN. OGIC promotes Ohio’s grape and wine industry, Ohio Proud promotes products grown and produced in the state, and Ohio CAN helps regional producers provide their products to underserved areas in Ohio.

Eckstein looks forward to revitalizing ODA’s Marketing Division by implementing programs that will assist farmers and agricultural businesses in promoting and marketing their products, expand existing markets, and develop new markets for their goods and services. The Division will also focus on direct farm marketing, education, and outreach. The addition of two new employees will strengthen these efforts.

“I’m honored and excited for this opportunity to create a stronger connection between Ohio’s agricultural producers and our consumers,” Eckstein said.

Eckstein graduated from The Ohio State University with a bachelor’s degree in Animal Science and a minor in Communication. She grew up on a dairy farm in Champaign County where she was involved with both 4-H and FFA, serving as a State Officer. She and her husband, Aaron, have two children.

Farm Office Live Webinar Slated for December 16

The Farm Office Team of OSU Extension will be holding their December Farm Office Live Webinar on Friday, December 16 from 10:00 to 11:30 a.m. via Zoom. Farm Office Live is a monthly webinar of updates and outlooks of legal, economic, and farm management issues that affect Ohio agriculture.

In this webinar, the teaching team of Peggy Hall and Robert Moore (Attorneys from the OSU Agricultural and Resource Law Program) and Eric Richer and David Marrison (Field Specialists, Farm Management) will share the following topics:

  • Federal and State Legislative and Legal Updates
  • Time to Review Estate Plans
  • Year End Balance Sheet Strategies
  •  Federal Farm Program Updates
  • Food Safety Certification for Specialty Crops Program
  • Emergency Relief Programs
  • House Bill 95 Beginner Tax Credit Update
  • Upcoming Programs

The webinar is free.  Registration and more details can be made at go.osu.edu/farmofficelive

Where Are We Headed on Global Food Prices?  

By: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

The Current Forecast

Recent forecasts by the International Monetary Fund (IMF) (World Economic Outlook, October 2022) and others (Bloomberg News, November 15, 2022) suggest the rate of food price inflation will continue to decline as we head into 2023.  As already well-documented, global food commodity prices surged after Russia’s invasion of Ukraine, reaching a record high in March, prices then correcting to their pre-war levels in June and July.  This correction has been driven by improved supply conditions, partly due to the UN-Turkish brokered agreement to allow Ukrainian grain exports from the Black Sea, as well as macroeconomic factors, including rising interest rates and expectations of a global recession.

The IMF estimates food commodity prices added 5 percentage points to the average country’s food price inflation in 2021 and are forecast to add 6 percentage points in 2022, declining to 2 percentage points in 2023.  The upward trajectory in food prices between April 2020 and May 2022 was driven by a combination of supply-side factors:  the 2020-22 La Nińa weather event, food trade restrictions, grain demand by China, low interest rates, and of course the Russian invasion of Ukraine.

Despite the more positive outlook on food prices, there are still upside risks, including continued use of commodity export restrictions, weather events, higher fertilizer prices, and uncertainty due to the war in Ukraine.  Worldwide, consumers have been affected by higher food and energy prices, but the impact has been particularly acute in emerging economies.  For example, the average household in Ghana is paying two-thirds more than it did last year for diesel, flour, and other necessities, with other countries such as Sri Lanka, Pakistan, and Egypt seeing comparable increases (New York Times, October 5, 2002).  To put this in context, food prices facing US consumers are currently 11 percent higher than they were a year ago (USDA, Economic Research Service, Food Price Outlook, October 2022), although this increase has been driven more by increased food spending at home and supply chain costs than rising commodity prices (Federal Reserve Bank of Kansas City, Economic Bulletin, September 23, 2022).

These price increases have been exacerbated by appreciation of the US dollar, which is the strongest it has been for two decades, globally traded commodities such as wheat and oil being priced in dollars (New York Times, October 5, 2022).  In addition, with a large proportion of emerging economy debt being denominated in dollars, there is real concern about the possibility of a sovereign debt crisis, countries such as Egypt and Kenya being pushed closer to default, while others such as Sri Lanka have already defaulted (New York Times, September 26, 2022).

The Black Sea Grain Export Deal

Key to reducing pressure on food prices is continuation of the grain export deal signed by Ukraine, Turkey, Russia, and the United Nations (UN) on July 22 (USDA, Foreign Agricultural Service, Grain: World Markets and Trade, August 2022).  The deal, due to expire on November 19, has been extended for an additional four months, with Turkey and the UN remaining as guarantors of the initiative (Reuters, November 17, 2022) (see figure).

Announcement of the deal provoked immediate 2.75 and 1.3 percent price declines in wheat and corn futures prices respectively on the Chicago Board of Trade (Reuters, November 17, 2022).  However, Russia’s temporary withdrawal from and subsequent rejoining of the agreement in late-October/early-November led to sharp changes in wheat prices, underlying the ongoing potential for price volatility in grain markets.  Russia initially stated it was abandoning the deal on October 29 (Financial Times, October 29, 2022), but then rejoined on November 2 (Financial Times, November 2), wheat futures prices rising to $9.00 per bushel, and then reversing to $8.53 per bushel (Bloomberg, November 2, 2022).

The possibility of Russia leaving the agreement was being discussed throughout October, official statements indicating that extension of the deal was dependent on the West easing constraints on Russian exports of grain and fertilizers (Reuters, October 17, 2022).  While extension of the deal is a positive move, it is less than the one-year sought by Ukraine, plus they had also requested the deal be expanded to include additional ports in the Mykolayiv region (Financial Times, November 17, 2022).  It should be noted that, even with the deal in place, Ukrainian grain exports remain below their 2021 levels (see figure).

Looking Forward

Looking forward, the IMF argues it will be important for appropriate policies to be targeted at minimizing food price volatility, including targeted food aid to vulnerable consumers, and incentives for building up global grain stocks (World Economic Outlook, October 2022).  USDA reports global ending wheat stocks for 2022/23 will be their tightest since 2016/17 but given China accounts for more than 50 percent of these stocks, and their stocks are typically unavailable to the world market, global stocks are currently the lowest since 2007/08 (USDA/Economic Research Service, Wheat Outlook, November 14, 2022).  With stocks at such low levels, there will be continuing pressure on global supplies and prices (Bloomberg, November 15, 2022).

With the grain and oilseed harvest in the United States being close to completion, much will depend on the extent of planting and harvests in Argentina and Brazil (Bloomberg, November 15, 2022).   However, there is a growing need to solve an increasing gap between growth in global consumption and grain and oilseed yields (Zulauf, farmdocdaily, November 16, 2022).  There are two possible responses to this gap: either more land in production or increased yield growth.  Global harvested land has increased by only 0.9 percent since 2002, 22 million acres being currently needed per year, while stability of yield growth since 1980 suggests a significant increase is very unlikely (Fuglie, Applied Economic Perspectives and Policy, 2018).  Economic logic suggests only higher food prices can curb consumption growth and ration existing food supply, with obvious implications for low-income consumers.

The situations described above reinforce the fact that agriculture functions in a global market, with many factors influencing income and expenses.  Ohio farmers must remain aware of global forces impacting markets, analyze their financial position, and develop plans and alternatives to those plans to be positioned to act accordingly.

Farmers are encouraged to meet with their lender, input suppliers, Extension professional, and other trusted advisors to analyze and plan.  The following OSU Extension resources can assist in the process:

Farm Office:  https://farmoffice.osu.edu/

Ohio Farm Business Analysis & Benchmarking Program: https://farmprofitability.osu.edu/

Ohio Farm Enterprise Budgets:  https://farmoffice.osu.edu/farm-management/enterprise-budgets

Ohio Ag Manager: https://u.osu.edu/ohioagmanager/

 

Ag Lender Seminars Offered in October

By Wm. Bruce Clevenger, Ken Ford, Grant Davis, Shelby Tedrow, and Frank Becker

Ohio State University Extension has scheduled four seminars in Ohio for Agricultural Lenders. The dates are Tuesday, October 18th in Ottawa, Ohio; Thursday, October 20 in Urbana, Ohio; Thursday, October 20 in Washington Court House, OH, and Friday, October 21st in Wooster, OH.

These seminars are excellent professional development opportunities for Lenders, Farm Service Agency personnel, county Extension Educators and others to learn about OSU Extension research, outreach programs and current agricultural topics of interest across the state.

2022 Topics and Speakers by Location

Ottawa, OH – October 18th, Putnam Co. Educational Service Center, 124 Putman Parkway, Ottawa, OH  45875

  • Farm Service Agency Loan Program Update – Kurt Leber, Northwest Ohio FSA, District Director – Farm Loan and Farm Program
  • Long Term Care Impacts on Farming Operations – Robert Moore, J.D., Ohio State University Extension, Attorney, OSU Agricultural & Resource Law Program
  • Beef and Small Ruminant Enterprise Opportunities – Garth Ruff, Ohio State University Extension, Field Specialist, Beef Cattle
  • Farm Business Analysis with FINPACK and OSUE Farm Office – Clint Schroeder, Ohio State University Extension, Program Coordinator, Farm Business Analysis
  • Examining Land Values, Rents, Crop Input Costs & Margins & New Tax Policy- Barry Ward, Ohio State University Extension, Leader – Production Business Management & Director – OSU Income Tax Schools
  • Ag Commodity Grain Markets: Trends and Prospects – Seungki Lee, PhD, Ohio State University, Dept of Agricultural, Environmental, & Development Economics

Urbana, OH – October 20th, Champaign Co. Community Center Auditorium, 1512 South US Highway 68, Urbana, OH  43078

  • Farm Service Agency Update – Shari Deao, Champaign County Director, FSA
  • Examining Land Values, Rents, Crop Input Costs & Margins in 2023 – Barry Ward, Ohio State University Extension, Leader – Production Business Management & Director – OSU Income Tax Schools
  • Mental Health and the Agriculture Community – Bridget Britton, Behavioral Health Field Specialist, Ag & Natural Resources, Ohio State University Extension
  • Update on Alternative Energy in Ohio – Eric Romich, Energy Development Field Specialist, Ohio State University Extension
  • Long Term Care Impacts on Farming Operations – Robert Moore, J.D., Ohio State University Extension, Attorney, OSU Agricultural & Resource Law Program

Washington Court House, OH – October 20th, Fayette County Agricultural Center, 1415 US Hwy 22 SW, Washington Court House, OH  43160

  • Farm Service Agency Update – Katie Maust, Fayette County Director, FSA
  • Update on Alternative Energy in Ohio – Eric Romich, Ohio State University Extension, Field Specialist Energy Development
  • Long Term Care Impacts on Farming Operations – Robert Moore, J.D., Ohio State University Extension, Attorney, OSU Agricultural & Resource Law Program
  • Examining Land Values, Rents, Crop Input Costs & Margins & New Tax Policy- Barry Ward, Ohio State University Extension, Leader – Production Business Management & Director – OSU Income Tax Schools
  • Mental Health and the Agriculture Community – Bridget Britton, Behavioral Health Field Specialist, Ag & Natural Resources, Ohio State University Extension

Wooster, OH – October 21st, – Buckeye Agricultural Museum, 877 West Old Lincoln Way, Wooster, OH  44691

  • Timber Management – John Kehn, State Service Forester, Ohio Dept of Natural Resources – Division of Forestry
  • Dairy Economics – Jason Hartschuh, Ohio State University Extension, Extension Educator Crawford County
  • Beef and Small Ruminant Enterprise Opportunities – Garth Ruff, Ohio State University Extension, Field Specialist, Beef Cattle
  • Examining Land Values, Rents, Crop Input Costs & Margins & New Tax Policy- Barry Ward, Ohio State University Extension, Leader – Production Business Management & Director – OSU Income Tax Schools
  • Farm Succession Planning – David Marrison, Ohio State University Extension, Extension Educator Coshocton County

The registration cost to attend one of the Ag Lender Seminars is $75.00 and the registration deadline is one week prior to the seminar you are attending. Payments can be made by check by mail or by credit card (by phone only to 419-782-4771). Registration forms are available online at: https://u.osu.edu/aglenderseminars/

Registration questions can be directed to OSU Extension Defiance County 419-782-4771 or email clevenger.10@osu.edu

OSU Extension conducts the seminars from input from Ag Lenders, County Extension Educators and Extension Specialists.  The seminars are designed to provide information that Ag Lenders will use directly with their customers, indirectly within the lending industry, and as professional development for current issues and trends in production agriculture.  OSU Extension has been offering Ag Lenders seminars for nearly 30 years.

Agricultural Outlook from the Farm Science Review  

by: Professors Ani Katchova, Farm Income Enhancement Chair, Seungki Lee, Ian Sheldon, Andersons Chair of Agricultural Marketing, Trade, and Policy, Department of Agricultural, Environmental, and Development Economics (AEDE), and Chris Zoller, Agriculture & Natural Resources Ohio State University Extension (OSUE) – Tuscarawas County

At this year’s Farm Science Review a panel of AEDE economists chaired by OSUE’s Chris Zoller answered questions about global uncertainty and its impact on agriculture.  Their outlook for farm income, production, and global markets is summarized here.

Farm Income Outlook

Net farm income is expected to increase in 2022, up 5.2 percent from last year, mostly due to higher cash receipts which are offset by lower government payments and higher production expenses (ERS-USDA). High commodity prices are expected to more than buffer the largest-ever year-to-year increase in production expenses. However, farm income is projected to decline in 2023 and 2024 as commodity prices are expected to soften, and then hold steady through 2027 (USDA, Baselines).

The demand for farmland has surged this year due to higher farm income and high farm liquidity. With the return to normal supply of cropland for sale, farmers who have experienced several years of high grain prices have continued to strongly bid for land. Individual investors have also entered the land market as farmland is considered a safe, long-term inflation-hedging investment. This combined heightened demand propelled land prices higher in 2022. This year’s high inflation rate at 8.5 percent is another leading contributor to buoyant land values, yet high interest rates have counteracted it.

In line with high farm income, agricultural credit conditions have also remained strong in 2022, but the pace of improvement has slowed, with higher repayment rates and lower demand for agricultural loans (Federal Reserve Bank of Kansas City). In the past couple of years, the total agricultural loan volume has declined, mostly because of higher farm incomes resulting in fewer production loans. The trends for Ohio farms have followed those for US farms, although the reduction in production loans has not been as large for Ohio.  The rise in interest rates (currently about 3 percent and expected to increase more) to the levels seen in 2018 and 2019 are a major factor contributing to lower loan demand. Overall, an economy with an inflation rate at about 8.5 percent, which boosts land values but also increases farm production expenses, and a higher interest rate, will dampen the farmer’s ability to service debt.

Farm financial performance has improved in 2022 as the agricultural economy has been recovering from the pandemic. Agricultural loan delinquency rates have remained low this year, at 1.9 percent as of the end of the second quarter of 2022, compared to as much as 4 percent in 2012 (FDIC). For Ohio, the delinquency rate was even lower at 1.5 percent, with a total of two Chapter 12 bankruptcies in 2022 so far (FDIC and US Courts). Farm balance sheets are stronger this year than 2021 with an inflation-adjusted increase in assets and equity of about 4% each and a decrease in inflation-adjusted debt by 1.2 percent (ERS-USDA). The increase in farm income is associated with the first decline in total debt since 2012 and the bankruptcy rate being at its lowest level since 2004.

Negative Shifts in Supply and Demand Added to Grain Market Uncertainty

In the September WASDE report, USDA adjusted down its forecasts of both production and usage for major grains. So far, the drop in production has been somewhat overwhelming, resulting in persistently high commodity prices: corn and soybeans were anticipated to have average season prices of $6.75 and $14.35 per bushel respectively. However, prices are equilibrium outcomes, so they are limitedly instructive in a current market featured by contemporaneous shifts in both supply and demand. Consequently, it is important to explore both sides of the market.

In comparison to August, corn and soybean planted acreage and yield expectations have decreased, resulting in total corn and soybean production expected to be down by 5 and 1.5 percent respectively from 2021. Forecast corn and soybean use were reduced by 250 million and 93 million bushels from August. Exports drove the drop. Good weather in its northeast regions is boosting China’s harvest, which will reduce demand for US grain. Brazil is also expected to produce record volumes of corn and soybeans according to the latest observation of planting. Compared to last year, 21 percent more soybeans and 9 percent more corn are expected. As La Niña is expected to be less influential in 2023, the optimistic forecasts for Brazilian production should be taken seriously as it could be the coming season’s most bearish influence.

Lastly, several wildcards exist outside the market. First, the Federal Reserve has raised interest rates to 3 percent this year. Despite interest rates not being highly correlated with commodity prices, such a rate hike can have critical implications. The drastic increase in rates will certainly increase farm capital costs and reduce price competitiveness due to a strong dollar in export markets. Thus, a higher interest rate may burden farmers in terms of both supply and demand. Second, the ongoing war in Ukraine could be another game changer as it could induce further tightening of the energy market if the war continues through winter.

Volatility Will Characterize the Global Market

The global market outlook will be one characterized by continuing price volatility, due to the ongoing effects of the Russian invasion of Ukraine, the impact of drought on global grain production, slow rebuilding of stocks, along with various policy choices.  After two months of the export deal brokered by Turkey and the United Nations (UN) to get Ukrainian grain out through the Black Sea, 218 vessels have already left carrying a total of 4.85 million tonnes, only marginally denting the 20-25 million tonnes trapped in storage (Reuters, September 18).  With Ukrainian exports down 46 percent this year (Reuters, September 25), Russia finding it difficult to export its grain (Bloomberg, September 22), and persistent drought conditions in the United States, South America, and Europe affecting yields, not surprisingly futures prices for wheat, corn and soybeans have risen 17, 28, and 14 percent respectively over the past 12 months (Wall Street Journal, September 21, 2022).

At the same time, commodity prices are proving sensitive to policy pronouncements.  Threats by President Putin to stop Ukrainian grain exports in early-September pushed up wheat futures by 7 percent (Bloomberg, September 7, 2022), while his recent mobilization of Russian reservists and his suggested use of nuclear weapons in Ukraine immediately pushed up both wheat and corn futures (Wall Street Journal, September 21, 2022).  On top of this, India recently announced a 20 percent duty on two thirds of its rice exports, placing more pressure on already high levels of global food insecurity (Bloomberg, August 29, 2022).  With global grain supplies currently remaining tight, analysts are predicting two years of good harvests will be needed to rebuild global grain stocks and relieve market pressure (Wall Street Journal, September 20, 2022).

Planning for 2023

As we review the topics presented by our AEDE experts, phrases like declining farm income, inflation, the war in Ukraine, supply and demand, and global policy movements are evident.  It is becoming increasingly more important to analyze your current situation, critically analyze where and how each dollar is spent, develop a plan (along with back-up plans), execute your plan, and monitor performance.

As you wrap-up harvest, assemble a team of advisors (examples include accountant, lender, agronomist, nutritionist, and Extension Educator) to discuss your production and financial performance in 2022, plan strategies for the coming year, and schedule regular check-in times to monitor progress.

OSU Extension Offering Beginner & Small Farm College in Coshocton and Greene Counties

The Extension offices in Coshocton and Greene counties will be hosting the 2022 Beginner & Small Farm College on October 24, 31 and November 7 from 6:30 to 9:00 p.m. This college is designed to help landowners examine potential ways to increase profits on their small acreage properties. The program is open to all new or aspiring farmers, new rural landowners, small farmers, and farm families.

During this college, participants will be challenged to develop realistic expectations for their new farm business. They will receive information on getting started, identifying the strengths and weaknesses of their property, and developing a farm business plan. Information on farm finances, insurance, liability, labor and marketing will be covered during the college. The topics included in this workshop include:

October 24th-Getting Started on Your New Farm Business

  • Developing real-life expectations for your farm.
  • Examining the available resources and opportunities for your property.
  • Developing a farm business plan, including setting your family and farm mission, goals and objectives.
  • An introduction to marketing and selling agricultural products.

October 31st–Money, Money, Money! Managing your Farm Finances

  • Developing a family and farm balance sheet.
  • Using enterprise budgets to project farm income.
  • Recordkeeping for farm businesses and farm taxes.
  • Managing family and farm income and expenses.

November 7th–There’s More to Farming than Just Growing Stuff!

  • Farm Management for New Farms
  • Setting up your farm business, including choosing a business entity and obtaining employer identification numbers.
  • Farm taxes.
  • Obtaining farm financing.
  • Insurance and liability for farms.
  • Licenses and permits needed for a small farm business.
  • Employer responsibilities related to farm labor and labor laws.

Farm Tour (Date & Location TBD)

Each site host will be planning a farm tour so participants can visit with a successful local farming operation to learn how they started and what they have learned during the development of their farm business.

Registration: The cost is $30 for the first person and $15 for each additional. Registration is limited to the first 50 registrants per location. Registration deadline is October 17th. There are two methods to register for this college.  Registration on-line can be made at: go.osu.edu/smallfarmcollegereg  Registration can also be made by mailing in a registration form to the site host for the location you plan to attend. Click here for registration flyer.

Mail Registrations for Coshocton County Site to:

OSU Extension –Coshocton County

c/o David Marrison

724 South 7thStreet, Room 110

Coshocton, OH 43812

Mail Registrations for Greene County Site to:

OSU Extension –Greene County

c/o Trevor Corboy

100 Fairground Road

Xenia, OH 45385

More Information:

For more information about the Coshocton County location, contact David Marrison at

marrison.2@osu.edu or (740)722-6073

For more information about the Greene County location, contact Trevor Corboy at corboy.3@osu.edu or (937)736-7203

What are the Market Implications of the Ukrainian Grain Export Deal?  

by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

The Ukrainian Grain Export Deal

A grain export deal was finally signed by Ukraine, Turkey, Russia, and the United Nations (UN) on July 22 (USDA, Foreign Agricultural Service, Grain: World Markets and Trade, August 2022).  With much media fanfare, the first shipment of Ukrainian corn left the Bosphorus strait headed for Lebanon on August 3 (Financial Times, August 3, 2022).  The agreement, set to last for 120 days with potential for renewal, provides for the safe passage and inspection of grains from three Ukrainian ports on the Black Sea – Odesa, Chornomorsk, and Pyvdenny – shipments following a route to Turkish ports approved by the Russian navy, with an agreed 10 nautical mile buffer zone (Reuters, August 8, 2022).  The movement of grain will be monitored from a center in Istanbul, and before their return to Ukraine, vessels will be jointly inspected by teams from Russia, Ukraine, Turkey, and the UN to ensure they carry no weapons (New York Times, August 1, 2022).

At the latest count, a total of 33 vessels carrying 719,549 tonnes of grain have left Ukraine, with a further 18 vessels either loading or waiting to leave port (Reuters, August 23, 2022).  While the opening of Ukrainian grain export channels is an important step, it should be placed in perspective, Ukraine’s infrastructure minister Oleksander Kubrakov warning it will take months for its grain exports to reach pre-invasion levels (Financial Times, August 2, 2022).  In August 2021, 194 grain-carrying vessels left Ukrainian ports, Odesa, Chornomorsk, and Pyvdenny handling about 60 percent of export shipments, and with 20-25 million tonnes of grain trapped in Ukraine, it will take 371 vessels averaging 67,000 deadweight tonnes just to clear the backlog (Financial Times, August 2, 2022), all in the context of grain storage space filling up with the current harvest of wheat and barley (Wall Stret Journal, August 2).

While the opening of a safe grain export passage is welcome, particularly for importers in the Middle East and Africa, as well as for the Ukrainian economy and its farmers, the rate of shipments is constrained by the continuing conflict affecting port infrastructure, the demining of both ports and shipping routes, and the high logistical costs associated with transport and insurance (USDA, Foreign Agricultural Service, Grain, World Markets and Trade, August 2022).  The latter challenge is critical, with shipowners being understandably concerned about sending their vessels through mined shipping routes, all the time facing high cargo and war insurance costs (Bloomberg, August 6, 2022).

The shipping and insurance industry has made it very clear they want assurances of a secure journey to and from the Black Sea ports, with no threat of mines or attacks on their vessels and crews (Reuters, August 8, 2022).  Even though major marine insurance brokers such as Marsh and Ascot are providing a coverage facility up to $50 million for shipments, premiums for vessels sailing into the Black Sea are currently set at 5 percent of the value of the vessel compared to 0.025 percent before the invasion (Reuters, August 23).  On top of this, problems have already arisen with exports, the first cargo from Ukraine being refused by the Lebanese-based buyer on the grounds of poor-quality grain due to war-delayed shipment (Middle East Eye, August 8, 2022), a problem likely exacerbated by Ukrainian grain silos not being equipped with aeration systems for long-term storage (USDA, Foreign Agricultural Service, Grain, World Markets and Trade, August 2022).

 Global Market Implications of the Grain Export Deal

Notwithstanding the small number of vessels departing Ukrainian ports, many analysts suggest this has already had a dampening effect on global grain and food prices.  For example, wheat prices have returned to their pre-invasion level, although they remain 25 percent higher than they were a year ago (see figure, Bloomberg, August 17), and double the price it was five years ago (Wall Street Journal, August 2, 2022).  Critically, global food prices declined by 11.5 percent in July, the largest fall since 2008, although still up 17 percent from a year earlier (Bloomberg, August 5, 2020; Wall Street Journal, August 5, 2020).

Of course, the Ukrainian grain export deal is only one of several factors leading to prices declining.  For example, in the case of wheat, both production and exports from key suppliers such as Russia, Canada and the United States are currently forecast to be higher than expected earlier in the year (USDA, Foreign Agricultural Service, Grain, World Markets and Trade, August 2022).  However, with lower grain prices US farmers face a double-edged sword here: although crop prices have roughly doubled over the past two years, there have also been substantial increases in farm input costs (Des Moines Register, August 18, 2022), with fertilizer prices increasing fourfold in the past two years (Iowa State University, June 2022).

On the other hand, falling food prices is positive news on the consumption side, especially for those facing threats to their food security, although relief for importing countries will not be immediate with 50 million people in 45 countries currently facing famine according to World Food Program Chief David Beasley (Los Angeles Times, August 8, 2020).  However, beyond the impact of the Russian invasion of Ukraine, food prices are likely to remain volatile in the face of global weather events affecting production of key staples.  For example, India, the world’s largest rice exporter has seen a significant reduction in area planted due to lack of rainfall this season (Bloomberg, August 2, 2020), while dry weather conditions are affecting food production across the Northern Hemisphere from China through the United States, to Spain, Portugal, France, and Italy, the latter countries facing their worst drought in 500 years (Wall Street Journal, August 21, 2022).  In the case of China, the impact of drought could lead them to import more corn from the United States and Brazil (Wall Street Journal, August 17, 2020), with the potential for spillover effects on the world price.  The bottom line is that the price relief due to freed up Ukrainian grain is not a silver bullet in terms of global food security, global weather conditions also being a critical factor in driving production levels and prices.

The Russian invasion of Ukraine has passed the six-month mark and there is no clear end in sight.  The war and other factors continue to impact commodity markets.  Grain prices have seen their share of price swings recently.  While the rate of increase in fertilizer prices has slowed, they remain high.  In addition to fertilizer, we can expect most other inputs will continue to see an increase in their price.

Suggestions Moving Forward

Planning and analysis are always important, but with so many unknowns, these become even more critical.  A critical analysis of business performance and enterprise analysis can help identify profit centers and those areas that are less profitable.  The OSU Extension Ohio Farm Business Analysis and Benchmarking Program provides farmers the opportunity to do in-depth analysis and evaluation.  Additional information about the program is available here:

https://farmprofitability.osu.edu/.

Developing a budget for the crops and livestock you raise is of great importance, especially with so many factors impacting agriculture.  OSU Extension Enterprise Budgets are available here: https://farmoffice.osu.edu/farm-management/enterprise-budgets#2022.  Look for 2023 crop enterprise budgets to be released at the Farm Science Review.  These Excel spreadsheets allow you to use projected income and expenses for your farm to assist in planning.

We encourage you to talk to your Extension Educator, lender, input suppliers, and other trusted advisors that can help you navigate.  If you haven’t done so, now may be an excellent time to assemble a farm advisory team.  This team meets periodically throughout the year to assist with goal setting, monitoring production and financial performance, and providing recommendations to help you succeed.

 

Ohio Farm Custom Rates 2022

By: Barry Ward, Leader, Production Business Management, OSU Extension, Agriculture and Natural Resources; John Barker, Extension Educator Agriculture/Amos Program, Ohio State University Extension Knox County and Eric Richer, Extension Educator Agriculture & Natural Resources, Ohio State University Extension Fulton County

Farming is a complex business and many Ohio farmers utilize outside assistance for specific farm-related work. This option is appealing for tasks requiring specialized equipment or technical expertise. Often, having someone else with specialized tools perform tasks is more cost effective and saves time. Farm work completed by others is often referred to as “custom farm work” or more simply, “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

Ohio Farm Custom Rates

The “Ohio Farm Custom Rates 2022” publication reports custom rates based on a statewide survey of 223 farmers, custom operators, farm managers, and landowners conducted in 2022. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine, etc., and labor for the operation.

Some custom rates published in this study vary widely, possibly influenced by:

  • Type or size of equipment used (e.g. 20-shank chisel plow versus a 9-shank)
  • Size and shape of fields,
  • Condition of the crop (for harvesting operations)
  • Skill level of labor
  • Amount of labor needed in relation to the equipment capabilities
  • Cost margin differences for full-time custom operators compared to farmers supplementing current income

Some custom rates reflect discounted rates as the parties involved have family or community relationships, Discounted rates may also occur when the custom work provider is attempting to strengthen a relationship to help secure the custom farmed land in a future purchase, cash rental or other rental agreement. Some providers charge differently because they are simply attempting to spread their fixed costs over more acreage to decrease fixed costs per acre and are willing to forgo complete cost recovery.

New this year, the number of responses for each operation has been added to the data presented. In cases where there were too few responses to statistically analyze, summary statistics are not presented.

Charges may be added if the custom provider considers a job abnormal such as distance from the operator’s base location, difficulty of terrain, amount of product or labor involved with the operation, or other special requirements of the custom work customer.

The data from this survey are intended to show a representative farming industry cost for specified machines and operations in Ohio. As a custom farm work provider, the average rates reported in this publication may not cover your total costs for performing the custom service. As a customer, you may not be able to hire a custom service for the average rate published in this factsheet.

It is recommended that you calculate your own costs carefully before determining the custom rate to charge or pay. It may be helpful to compare the custom rates reported in this fact sheet with machinery costs calculated by economic engineering models available online. The following resources are available to help you calculate and consider the total costs of performing a given machinery operation.

Farm Machinery Cost Estimates, available by searching University of Minnesota.

Illinois Farm Management Handbook, available by searching University of Illinois farmdoc.

Estimating Farm Machinery Costs, available by searching Iowa State University agriculture decision maker and machinery management.

Fuel price changes may cause some uncertainty in setting a custom rate. Significant volatility in diesel price over the last several months has caused some concern for custom rate providers that seek to cover all or most of the costs associated with custom farm operations. The approximate price of diesel fuel during the survey period ranged from $4.50 – $5.25 per gallon for off-road (farm) usage. As a custom farm work provider, if you feel that your rate doesn’t capture your full costs due to fuel price increases you might consider a custom rate increase or fuel surcharge based on the increase in fuel costs.

For example, let’s assume the rate you planned to charge for a chisel plow operation was based on $4.50 per gallon diesel costs and the current on-farm diesel price is $5.50 per gallon. This is a $1 per gallon increase. The chisel plow operation uses 1.15 gallons of fuel per acre so the added fuel surcharge could be set at $1.15 per acre (1.15 gallons x $1 gallon).

The complete “Ohio Farm Custom Rates 2022” publication is available online at the Farm Office website:

https://farmoffice.osu.edu/farm-management/custom-rates-and-machinery-costs